LOS ANGELES — The modest Los Angeles suburb that became the poster child for municipal corruption when it was discovered three years ago that its municipal leaders had looted millions of dollars from its treasury remains deeply in debt and on the verge of financial crisis, according to a report released Wednesday by the state Controller's Office
The city of Bell's general fund balance is more than $1 million in the red and its residents are owed more than $3 million in illegally collected taxes and licensing fees, according to the audit by state Controller John Chiang's office. The city must also repay the state $663,000 in misspent gas tax funds and return $256,000 in grants to the state Department of Parks and Recreation. Bell could also be on the hook for as much as $4 million in legal fees as a result of the scandal, Chiang said.
If those issues aren't addressed, he said, the city faces a "fiscal crisis."
What's more, many reforms he recommended three years ago to prevent such a scandal from recurring have not been implemented, the controller said.
"The city of Bell has made some progress since it ejected a corrupt city management two years ago," Chiang said in a statement. "But many of the same fiscal management and internal control lapses that allowed Bell to fail its citizens in the past remain unaddressed today."
Mayor Violeta Alvarez said the city appreciates the audit and will use it as a blueprint as Bell continues to work on solving its debt issues and other problems that were left behind by a previous City Council, which saw several of its members convicted of corruption charges earlier this year.
City Councilman Ali Saleh added that several of the reforms Chiang mentioned have been or are being implemented and that the city continues to work diligently to solve its financial problems, negotiating with bankers and others to eliminate some of the millions of dollars of debt the previous council ran up.
"We went into a city that was in dire need, there were a lot of problems and we corrected many of those," said Saleh, who along with Alvarez was elected when most of the previous council's members were recalled two years ago.
Authorities arrested Bell's former city manager, his assistant and six former City Council members in 2010 after it was revealed that more than $5.5 million had been diverted to pay council members' salaries of about $100,000 a year and the city manager's annual salary of $800,000 a year. Several other officials, all of whom have since left the city, were also earning huge salaries.
A jury convicted five of the former council members in March of misappropriating public funds by creating a Solid Waste and Recycling Authority that met only once, did no work and existed only to pay them. One former councilman, who was not in office when the agency was created, was acquitted.
Jurors deadlocked on other charges, and prosecutors announced Tuesday they plan to retry the five officials on those counts.
Robert Rizzo, the former city manager who was said to have been the salary scheme's mastermind, faces trial later this year, along with his former assistant, Angela Spaccia.
Chiang praised the city's newly elected leaders for bringing honesty and transparency to local government and for instituting more than two dozen internal controls to prevent such a scandal from happening again. But he said dozens more reforms remain to be implemented.
"For example, the city has yet to establish oversight procedures to ensure the accuracy of financial and accounting records prepared by staff," his audit said.